Interest on borrowings made for acquiring shares in Malaysian company alongwith controlling interest is allowable under the Income-tax Act

Recently, the Mumbai Bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of Ultramine & Pigments Ltd. (the taxpayer) held that interest on borrowings made for acquiring shares in Malaysian company alongwith controlling interest is allowable under Section 57(iii) of the Income-tax Act,1961 (the Act).

Further, the Tribunal held that the net income of the taxpayer was negative under the provisions of the Act and since it being more beneficial than the India-Malaysia tax treaty, the taxpayer was entitled to claim deduction for interest on borrowings.